Thanks to President Barack Obama’s debut as a contributor for the Journal of the American Medical Association, the “public option” has made its way back into the great health care debate. Democratic presidential candidate Hillary Clinton approves of it as well.
Why not make Obamacare’s health insurance exchanges more robust by offering a public health plan that can compete alongside private health plans? In the words of our president, it will “help keep the private sector honest.”
For those who want to move more quickly toward a single-payer health care system, implementing a public option is the way to do it. For the rest of us who are fed up with Obamacare’s misleading promises, here are three reasons why the proposed benefits of a public option would create more problems for patients and providers.
- A self-sustaining option – Public-option advocates say that seed money and membership premiums will make the program a self-sustaining success. Some of those advocates said the same thing about Obamacare’s consumer-operated and oriented health plans – otherwise known as the “co-ops.” Those co-ops replaced the initial proposal for a public option during final congressional negotiations prior to the law’s passage in 2010. Half of them turned out to be a financial disaster. Poor business management, sweetheart deals, and boards full of friends have instead forced almost 1 million co-op consumers to enroll in other health plans. So much for consumer protection. Ironic, given that their mission statements stress “patients over profits.”
- Lower-cost plans – For the public option to keep visible costs lower than competing private coverage, the government will strong-arm its way into setting price controls equivalent to Medicare rates. Public option proponents also say that public payers like Medicare and Medicaid have much lower administrative costs compared to private insurers, so a public plan is critical to slow down rising health care expenditures.
Don’t be fooled by the perception that government-funded health plans may be more efficient due to the low-admin-cost argument. Yes, the government spends less on marketing, advertising, and overhead and doesn’t have to worry about profit motives to please shareholders like private carriers do. But what about the indirect admin costs that go overlooked? Take the costs of handling false claims. The Medicare Payment Advisory Commission explains:
“The Centers for Medicare and Medicaid Services estimates that about $9.8 billion in erroneous payments were made in the fee-for-service program in 2007, a figure more than double what CMS spent for claims processing and review activities. … The significant size of Medicare’s erroneous payments suggests that the program’s low administrative costs may come at a price.”
In other words, the percentage of admin costs is artificially lowered when billions in false claims are added to the denominator of total Medicare spending.
- An equal, level playing field – This catch phrase that’s being thrown around by public-option backers really is a euphemism for “a way to further destabilize the private health insurance market.” When you have a government-supported plan in the mix that comes with artificially lower premiums and a Medicare ceiling payment structure, private insurers will be forced to pass on artificially higher premiums to consumers. Why? Because hospitals and providers will try to negotiate higher payment rates from private carriers to make up for reimbursement that doesn’t adequately cover the cost of care from the public option and other government insurance programs. This vicious cycle has been happening for years with Medicare and Medicaid paying medical professionals below market value.
I’ll give President Obama credit for owning up to some major flaws in his signature health care law, but his JAMA recommendations — like the public-option proposal — will only exacerbate the affordability factor.
The scholarly article was published not too long after Speaker Paul Ryan and the GOP House released their latest Obamacare repeal-and-replace proposal. It’s a 37-page document full of market-oriented ideas in which patients will ideally have more choice and affordable options for their health insurance. It’s a conversation starter for reforming Medicare’s depleting trust fund and restructuring Medicaid’s financial flaws.
While some ideas are hailed by Obamacare opponents, such as expanding health savings account contributions, other ideas are criticized for being strikingly similar to the status quo – like keeping intact health insurance subsidies.
So, what is a true (and unfortunately not all that politically feasible) libertarian way to change how Americans access and pay for health care? See here and here.
Katherine Restrepo is health and human services policy analyst for the John Locke Foundation.